Surviving Downturns

A_Flock_Of_Sheep

Many of you lovely investypeeps have been plodding along with investing for many years and in just a week I have learned so much from you guys.

I was wondering what your methods are for keeping cool and collected when there is a major downturn. How many stock market downturns have you experienced in your investing life and how deep was the fall/tank?

Thrugelmir

Black Monday in October 1987. The board went entirely red. Over the course of a few days FTSE lost around 22%.

Personally I've always invested in income generating assets. So that I can the utilise the income to diversify into a broader range of investments and rebalance my portfolio.

gadgetmind

Black Monday in 1987 was the first for me.

http://en.wikipedia.org/wiki/Black_Monday_(1987 )

I kept on drip-feeding and rebalancing.

There were plenty more after that.

http://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

I kept on drip-feeding and rebalancing.

Maybe I now have more of an eye to value when deciding on my asset allocation, but usually end up admitting that I don't know and stick with 80% equities and 20% bonds+property+other.

I know people who've panicked, sold low, and then said they wouldn't ever trust the stock market again. I guess they want it to be an infallible money-machine, but that's not the way it works.

Unless you keep drip-feeding and rebalancing for multi-decade periods.

JoeCrystal

Never went through one when investing. I am seriously looking forward to next one...

Cheers,
Joe

gadgetmind

When I read a load of comments from people trying to will the markets up, and others trying to talk them down, I am rather reminded of blow football.

JoeCrystal

gadgetmind wrote: »

I am rather reminded of blow football.

You meant it is really full of hot air?

Cheers,
Joe

grizzly1911

Have been investing since the mid 80s. So been in them all since then but never really bothered selling out just kept regularly drip feeding.

I did make a punt on an Aberdeen IT fund in the dot com bubble and lost around 30% on that particular line.

The recent crash saw some large single equity hits but I have stayed with them and they have recovered or on their way.

They are just part of a pot which also includes property interests and as it has grown have just get used to the swings. It is reasonably well spread.

At a point over the next decade I will need to think about doing a redbuzzard and thinking more about more of the Standard Life GARS type route.

Don't risk what you can't afford to loose a chunk of for a while.

talexuser

I looked at funds as long term before you actually need the money. In that case you ride the downturns. There have been many reports and theories about jumping in and out of the market but little evidence you can consistently beat staying invested. The worst luck is obviously jumping in just before a crash, so drip feed if afraid of this.

You run the risk of a crash just before you need the money. In that case hope the pile is enough to take a little if absolutely necessary and the rest will recover in a year or two. At the end of the day, long term, and hoping to beat inflation, for large sums, it's the only game in town?

dunstonh

I was wondering what your methods are for keeping cool and collected when there is a major downturn.

Knowledge. You know there will be downturns. Its not a case of it but when. You just don't know when. So, armed with that knowledge and understanding there is no point worrying about it when one comes along.

If you cant accept that then you dont invest to that risk level.

How many stock market downturns have you experienced in your investing life and how deep was the fall/tank?

Two major, many minor. The big two were early part of millenium and credit crunch. Both fell by nearly the same amount 43%. However, I only suffered around 25% losses as I wasnt invested 100% in equities and not all areas fell by as much as that.

Thrugelmir

To my earlier post I would add.

Stick to the fundamentals. A good company is still a good company. Irrespective of what the market indices do. Crashes are a good time to go buying, as falls are indiscriminate. Often better profits can be found (i.e. higher yield) after a major correction in individual shares. Particularly smaller companies which don't receive the attention as the blue chips from asset managers due to the low amount of tradeable stock.

I've always bought Private Equity investment trusts after a sizable fall. As discounts seem to widen significantly for no apparent reason.

Daniel54

It is important to realise that you have only made an actual loss if you sell.Otherwise the loss is notional.

After the collapse of the tech bubble I abandoned trying to time the market and have drip fed the full ISA allowance monthly,as do many others above.

It is difficult to look at paper losses because inevitably one feels poorer.In my experience absolutely the worse thing to do is to allow your strategy to be changed in reaction to events.